David Zwang is a well-known industry expert who has recent joined the WhatTheyThink Consulting Service and Speakers Bureau. He shares his thoughts about the bright side of the current economic downturn.
Surviving and prospering in a recession
April 14th, 2009 -- You would have to be living in a cave not to know what is going on in the global economy. However, this isn’t the first time we’ve seen an economic downturn. I’ll leave it to the economists, pundits, and news media to determine how this one ranks in the annals of history, but one thing we’ve learned from previous tough times is that there is a bright side.
First of all, if taken advantage of, this is a great time to reflect on what you really want to do with your life or business. In fact, according the U.S. Small Business Administration, history has shown us that during the last two recessions there were more small business startups than there were those that went out of business. Additionally small businesses usually have more flexibility to ride out a recession than a larger business. This allows them to take more risk in looking at what they can do and how they can change their businesses.
When you are busy, the last thing you typicall do is think about futures, since you are devoting your time and energy getting out that last minute job. Using this time to reflect on what you are currently doing and determining if this is what you want to do in the future, and if it has some sustainability over the long term, can put you in a much better position as the economy recovers.
How do you survive when printers are doing work below cost?
This is usually the primary concern I hear from American production operations. You need to remember, if you are selling below cost you can’t make it up in volume. Your prices should reflect cost and market, not panic.
While technology can sometimes be difficult to understand, profitable manufacturing is fairly straightforward. There are two main components; revenue and cost. If you can’t raise your prices in a highly competitive market, you need to look at reducing costs.
When I go in to do production audits of companies, no matter where they are in the world, I’ve found there are always many ways to reduce cost and improve profitability without cutting personnel. You first need to review and optimize processes.
The PIA (Printing Industries of America) does an annual survey to determine the range of performance across the printing industry. Historically there is a small group of printers, usually about 10% of the industry, that represents the “profit leaders.” What differentiates them from others is that they follow Rosen’s Rule (Robert Rosen): “they don’t do one thing well, they do hundreds of seemingly meaningless things very well…all the time.”
The good news is that there are organizations like the Ghent PDF Workgroup who have researched and developed best practices to help you start. There are also lots of ISO Standards that can guide your way through the many paths you can take in your production processes. If you don’t have the depth in your organization to properly review what you are doing, there are also many good consultants in the marketplace that have the experience to help you navigate. Just make sure you have verified their qualifications before engaging them.
Prepare for a bright future
It’s also a time to remember the old adage, ‘it’s not what you have, it’s how you use it.’ Your clients are less impressed by the equipment you have, and more concerned about how it and you can effectively satisfy their needs. Remember these mandates, especially in today’s market; Service, Quality and Price. It is in the best interests of your clients for you to become more efficient at what you do.
Use slow times to map and evaluate your organization and workflows.
Use industry standards and best practices to raise the bar on quality and efficiency, and find ways to streamline and automate processes.
Vendors are making deals, and borrowing costs are lower
While the last thing you may be thinking about is purchasing new equipment, vendors are currently making deals to reduce inventories and keep plants operating. Many have made arrangements with lending institutions to provide credit to purchase their equipment.
While there are concerns about available credit, this is actually a great time to shop for and purchase more efficient equipment that can help you reduce labor costs as a percent of product cost. The U.S. prime interest rate has dropped from 5.25% a year ago to 3.25% today, and other global rates have had similar adjustments. Accordingly, commercial lending rates have also retreated.
Outsourced duties and new clients
As your larger competitors and your customers reduce labor forces, opportunities for you to help them fill in some of the resulting gaps are open to you. They still need to get the work done. Additionally, there are many incremental services, such as coordination, design, fulfillment, or other steps in the process that you can offer. Running a production operation has helped you and your team hone your skills, and as such you can be a great resource. Offering to assist your clients, process partners, or even competitors with some of these functions, on an as-needed basis, brings you closer to them and ensures that you are available and top of mind when other opportunities arise.
This can also be the time for you to try to get access to the prospects you haven’t previously had success in cracking, since many obstacles may have been eliminated with labor reductions.
In Summary, what are the top issues you need to think about in 2009?
1. It’s not about hunkering down to ride this out, it’s about refining and preparing for now and the future; cutting budgets alone doesn’t help
2. Differentiate yourself with exceptional service and support
3. Review and optimize processes
4. Create a sleek, adaptive organization and continue to change as needed
5. Watch credit and collections
6. It might be a great time for you to look at more efficient equipment
7. Employee turnover at previously impenetrable accounts can open doors
8. Clients are changing as well – this can be an opportunity
9. Become a process partner to your clients, and competitors
10. There is work out there, and you need to be prepared to win and produce it